Duane Morris Takeaways: Judge William Alsup of the U.S. District Court for the Northern District of California issued a decision in Nehmer, et al. v. U.S. Department of Foreign Affairs, Case No. 3:86-CV-06160 (N.D. Cal. May 20, 2025), rejecting class counsel's proposed cy pres distribution of over $63,000,000 in funds appropriated by Congress to settle the claims of deceased Vietnam veterans injured by Agent Orange. Judge Alsup explained that a cy pres distribution was not authorized by the 1991 consent decree in the case, nor by any statute and that class counsel needed to redouble efforts to locate veterans' survivors or to pay veterans' estates. The decision makes clear that, absent an express cy pres provision in a class action settlement or statutory authority supporting it, a cy pres distribution is not authorized.
The ruling is an important primer for corporate counsel in the consideration and use of settlement tools – such a cy pres distribution – in resolving class actions.
Case Background
The Nehmer case settled in 1991 and involved the claims of veterans who suffered from illnesses because of the use of Agent Orange during the Vietnam War. Because the extent of harm caused by Agent Orange was not then fully known, the consent decree that was entered after the settlement required claims to be automatically reopened if they turned on diseases the Department of Veterans Affairs had earlier rejected but later recognized as service related. The consent decree did not contain a time limit sunsetting the opportunity to file claims, nor for the VA's obligation to re-adjudicate claims. Over the last nearly 35 years, more than $4.5 billion in retroactive payments have been made to veterans under the settlement.
At issue before the Court was the re-adjudicated claims of 1,137 veterans who are now deceased and whether the $63,000,000 in settlement payments owed to those deceased veterans could instead, as proposed by class counsel, be paid to a cy pres organization. A large portion of the deceased veterans owed these funds had no eligible survivors nor any open estate and, for those that did have eligible survivors, efforts to locate the survivors through the use of private investigators proved unsuccessful. The VA took the position that, because the consent decree did not provide for a cy pres distribution, the funds should remain in the VA's possession, available for payment should any survivor ever emerge to claim their share.
The Decision
The Court rejected class counsel's proposed cy pres distribution, noting it was not authorized by the consent decree nor by any statute, and that the Court therefore lacked power to order such a distribution. As to the deceased veterans with survivors, the Court held that more effort needs to be undertaken to find them, including repeating the private investigator's efforts and through the placement of advertisements. As to the deceased veterans who seemingly had no survivors and closed estates, the Court determined that more effort needs to be expended to pay the estates, even if costly. The Court explained that payment to the estates might be possible without having to re-open the estates and class counsel needed to expend more efforts in this regard, efforts that might even reveal beneficiaries.
Implications of the Decision:
The Nehmer decision makes clear that, absent an express cy pres provision in a class action settlement or statutory authority supporting it, a cy pres distribution is not authorized. Even when there is a cy pres provision in a class action settlement, courts are increasingly scrutinizing such clauses. Parties need to think carefully about utilizing the doctrine and the designation of unclaimed settlement funds.
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